UBS analyst warns:
“Every bear market of the past 50 years has witnessed an actual decline in S&P 500 forward earnings,” says lead strategist Francois Trahan, who lays out a deteriorating landscape in a note to clients.
He says the consensus year-on-year growth rate in S&P 500 forward earnings has dropped to a mere 1% from a peak of 23% in September 2018. And leading economic indicators, which forecast future activity and can offer clues on future earnings trends, also hint at more weakness ahead, as this chart shows:
“Ultimately, the most vulnerable macro backdrop for equities occurs when forward earnings growth turns negative as LEIs are trending downward (pushing [price-to-earnings] lower),” says Trahan, who offers another ominous chart:
He also suggests investors do not count on the Fed throwing stocks a lifeline here because interest rates and equities are positively correlate d at present, which means if rates are lower stocks will follow, as was the reaction after the last two cuts.
https://www.marketwa...9?mod=hp_LATEST